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Regulative environment of Virtual Assets in Romania

Romania is one of the countries of the European Union, and, like other countries, is awaiting the introduction of new rules established by the Regulation of the European Parliament and of the Council on the markets for crypto-assets (hereinafter referred to as “MiCA”). Since there is currently a lack of regulatory clarity, in this article we propose to look at the main positions of the Government regarding this issue.

Regulation of cryptocurrencies in Romania

At the current stage, in Romania there is no separate legislative paper on cryptocurrencies which establishes rules and procedures for their treatment, acquisition and use. Romania, like many countries that have not adopted special rules at the national level, but uses the EU regulatory framework for cryptocurrencies.
Main regulatory authorities in the field of finance and fintech, are the Financial Supervision Authority (hereinafter referred to as ASF) and the National Bank of Romania (hereinafter referred to as BNR). ASF and BNR are responsible for the supervision and monitoring of banks and financial companies operating in Romania. The ASF protects the interests of financial market participants and is responsible for the supervision of financial products, information published by companies, and financial service providers, while the BNR is responsible for the supervision of individual financial institutions (for example, credit institutions, investment firms, payment institutions, non-banking financial institutions and electronic money institutions) and the proper functioning of the financial system as a whole.
BNR’s position is quite clear with regard to cryptocurrencies that are very volatile and pose a high risk for investors to result in  financial losses as a result of investing in cryptocurrencies. In particular, from July 15, 2020, providers providing services for the exchange of virtual and fiat currencies, as well as providers of depository wallets, are required to comply with Law No. 129/2019 “On Prevention and Combating Money Laundering and Financing of Terrorism” in some legal acts with subsequent amendments and additions, among other things, with the requirement to obtain permission or registration with the Ministry of Finance through the Foreign Exchange Licensing Board.
The rules administered by the National Bank of Romania do not prohibit credit institutions from offering account services to providers engaged in the exchange between virtual currencies and fiat currencies, as well as providers of custodial wallets. Credit institutions are required to comply with Law No. 129/2019, namely, by  applying “Know Your Customer” and risk management measures in the field of prevention of money laundering and terrorist financing. However, it should be borne in mind that the provision of services takes into account the risks that a credit institution may face when servicing such customers.

Thanks to rapid circulation of virtual currencies (current estimates show that there are more than 2 million crypto holders registered in Romania, which is equivalent to 10% of the population), the Romanian Government started to organise working groups for regulating the business of virtual asset service provider. As a first step, the Romanian Government decided to safeguard the national interest by regulating such new emerging technologies in the most vulnerable areas, including from the tax, anti-money laundering/know-your-customer ("AML/KYC") and criminal law perspectives.

In addition, more than 15 new activities based on the new emerging technologies have also been established by private service providers in Romania, including:
(i) initial coin offerings ("ICOS");
(ii) initial exchange offerings;
(iii) cryptocurrencies that have 1:1 parity with fiduciary coins (stablecoins);
(iv) exchange services between cryptocurrencies (crypto exchanges);
(v) exchange services between cryptocurrencies and fiat currency,
(vi) cryptocurrency storage services (crypto wallets);
(vii) services for monitoring transactions/payments with cryptocurrencies (tracking tools);
(viii) transaction validation activities (mining farms); (ix) liquidity assurance services (farming pools/landing platforms);
(x) e-commerce services (marketplace);
(xi) cryptocurrency payment/receipt services (transaction/payment processors);
(xii) online games (crypto games);
(xiii) NFT generation services;
(xiv) secure telecommunications services; and
(xv) governance system decentralisation services.

Virtual Assets Service providers and digital wallet services already operating in the European markets and fulfilling requirements of the the fifth anti money laundering directive (5AMLD) will not be exempted from the Romanian authorisation procedure if they intend to expand their activity in this country. Thus, in order to legalize business activities in Romania, all providers of virtual currency exchange services and digital wallets must obtain authorisation from the Romanian Digitization Authority, Also, since 2019, the Romanian Criminal Code has classified digital currencies as a "means of payment without cash. The only purpose of the classification is to sanction crimes such as theft or embezzlement committed in connection with cryptocurrencies.

However, despite the absence of a legal definition of cryptocurrencies as a category, Romania still uses the concept of “virtual currency” in the legislation. So, in Art. 114 of the Fiscal Code of Romania states that one of the income from third-party sources is income received from transactions with virtual currency. Income from the exchange of virtual currency, according to Art. 116 of the Romanian Fiscal Code, is defined as the positive difference between the sale price and the purchase price, including the direct costs associated with the transaction. Income below the level of 200 lei/transaction (41 euro) is not taxed, provided that the total income in the financial year does not exceed the level of 600 lei (123 euro). Such income should be declared and submitted to the relevant fiscal authorities.

Types of tokens

Analyzing EU legislation and new proposals for Regulation, it can be said that MiCa will most probably allocate the following types of tokens in the near future:
  • "Asset-pegged token" means a type of crypto-asset designed to maintain a stable value by referencing the value of multiple fiat currencies that are legal tender, one or more commodities, one or more crypto-assets, or a combination of such assets;
  • "Electronic money token" or "electronic money token" means a type of crypto asset whose main purpose is to be used as a medium of exchange and which is designed to maintain a stable value by referring to the value of a fiat currency. it is legal tender;
  • "Utility token" means a type of crypto asset that is intended to provide digital access to a good or service available in the DLT and is accepted only by the issuer of that token.

Conclusion

As indicated above, at the moment it is difficult to say that a regulated and transparent cryptocurrency market has been formed in Romania. Romania has not adopted the necessary laws that would establish clear rules for the treatment of cryptocurrencies in the country, however, it should be noted that in anticipation of the final adoption of MiCA, further steps by the governments of the Member States of the European Union can be predicted.
In conclusion, it should be said that cryptocurrency in Romania is not regulated (except for the need to declare revenues made from the transfer of virtual currency in accordance with the provisions of Articles 114, 116 of the Fiscal Code), however, it is not prohibited, which allows it to be freely circulated. Romanian legislation does not distinguish different types of tokens into separate categories yet, but is expected to do so by implementing EU wide laws in its jurisdiction. While  we can expect an improvement in the regulation of virtual assets, due to the latest changes in EU legislation. Further harmonization of legislation will inevitably facilitate doing  business with crypto assets not only in Romania, but throughout the European Union.

The content of this article is intended to provide a general guide to the subject matter, not to be considered as a legal consultation.

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